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Artesanias Hacienda Real S.A. de C.V. v. North Mill Capital, LLC (In re Wilton Armetale, Inc.)

United States Court of Appeals for the Third Circuit

May 19, 2020, Argued; August 4, 2020, Filed

No. 19-2907

Opinion

 [*277]  OPINION OF THE COURT

BIBAS, Circuit Judge.

] When a company declares bankruptcy, that declaration does not erase a creditor's constitutional standing to sue. As a company nears insolvency, some may plunder the sinking ship. By depleting its remaining assets, they lower the odds that the company will repay its creditors. That risk of loss gives the creditors constitutional standing to sue the plunderers.

] If the company declares bankruptcy, though, creditors may lose the statutory authority to pursue those claims. Under the Bankruptcy Code, a trustee manages the company's estate, including those creditors' asset-plundering claims. The Code thus shifts the statutory authority to pursue [*278]   [**2]  those claims from the creditors to the trustee, unless the trustee relinquishes it.

At times, we have said that this transfer of statutory authority takes away a creditor's "standing." But as the Supreme Court recently held, that statutory question has nothing to do with constitutional standing. ] We now clarify that Bankruptcy Code "standing" is not constitutional standing (and thus is not jurisdictional) and that Chapter 7 trustees can relinquish the statutory authority to pursue a claim back to a creditor.

In this case, we hold that the creditor plaintiff has both constitutional standing and the statutory authority to sue two defendants who allegedly plundered a now-bankrupt company that owed the creditor money. When the trustee formally abandoned the estate's claims against those defendants, he returned the power to pursue those claims to the creditor. So we will vacate and remand the District Court's order to the contrary.

I. Background

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968 F.3d 273 *; 2020 U.S. App. LEXIS 24487 **; 69 Bankr. Ct. Dec. 38

IN RE: WILTON ARMETALE, INC., a/k/a Wapita, Inc., Debtor;ARTESANIAS HACIENDA REAL S.A. DE C.V., Appellant v. NORTH MILL CAPITAL, LLC; LEISAWITZ HELLER

Prior History:  [**1] On Appeal from the United States District Court for the Eastern District of Pennsylvania. (D.C. No. 5-18-cv-05553). District Judge: Honorable Edward G. Smith.

Artesanias Hacienda Real S.A. de C.V. v. N. Mill Capital LLC, 607 B.R. 189, 2019 U.S. Dist. LEXIS 133321 (E.D. Pa., Aug. 8, 2019)

CORE TERMS

abandoned, plundering, warehouse, relinquish, settlements

Constitutional Law, Case or Controversy, Standing, Particular Parties, Bankruptcy Law, Examiners, Officers & Trustees, Duties & Functions, Capacities & Roles, Case Administration, Duties & Functions, Liquidations, Judicial Review, Standards of Review, De Novo Standard of Review, Civil Procedure, Preliminary Considerations, Justiciability, Standing, The Judiciary, Bankruptcy, Estate Property, Contents of Estate, Immunities & Liabilities, Personal Stake, Elements, Commencement of Case, Involuntary Cases, Injury in Fact, Business & Corporate Compliance, Claims, Claims, Types of Claims, Types of Claims, Claim Classification, Definitions, Abandonment of Property, Trustee Action